There’s good news for British Columbia taxpayers who invested in flow-through mining shares. The province has extended the mining flow-through shares (MFTS) tax credit through Dec. 31, 2018.
Flow-through shares are similar to shares of common stock but are sold by mining companies to raise money for exploration and research. Tax-incentive-based flow-through shares programs, such as the one in place in British Columbia, greatly benefit junior mining companies by encouraging investment to provide the capital needed for exploration and research.
The B.C. MFTS tax credit allows individuals who invest in flow-through shares to claim a nonrefundable tax credit of 20% of their British Columbia flow-through mining expenditures. There are a few things to keep in mind when discussing this credit with clients:
- Only individuals may claim the credit, no trusts or estates
- The credit is only available for British Columbia flow-through mining expenditures
- Taxpayers cannot claim the credit for more than their British Columbia income tax payable for the year
- This is a nonrefundable credit, meaning it gets deducted from reported income
- Clients can carry any unused credit back three years or forward for 10 years
You can claim the credit for your clients when you file their T1 Income Tax Return, using the British Columbia Mining Flow-Through Share Tax Credit form (T1231). Enter the amount of the credit you’re claiming for them on the British Columbia Tax form (BC428). Clients should have a Statement of Resource Expenses information slip (T101) or a Statement of Partnership Income information slip (T5013) showing the expenditures that were transferred for the tax year. Use this information to apply for the credit and include it in the return.
You need to file your client’s T1231 tax credit application within one year of the due date for the tax year in which the expenditures were transferred, even if they don’t deduct the credit in the current year.